scholarly journals Auditors’ Duty to Respond to “Red Flags” Indicative of Overvaluation of Inventory: A Case Study of Sanchez v. Deloitte & Touche

2021 ◽  
Vol 04 (08) ◽  
Author(s):  
Stephen Errol Blythe ◽  
Keyword(s):  
Control System ◽  
Internal Controls ◽  
Red Flags ◽  
Securities Fraud ◽  
Securities Litigation ◽  
Accounting Principles ◽  
Legal Case ◽  
Legal Justification ◽  
The Impact

This is a legal case study of Sanchez v. Deloitte & Touche. It covers: (a) legal elements of a securities fraud claim; (b) the effect of the Private Securities Litigation Reform Act upon the pleading of an auditor’s complicity in securities fraud; (c) how SEC Rule 10b-5 affects auditors; (d) potential red flags pertaining to an audit client’s deficient inventory control system; (e) the failure of a client’s internal controls to detect a gross overvaluation of inventory; (f) the failure of an auditor to ensure that the client’s inventory is valued at the lower of cost or market, as required under General Accepted Accounting Principles; (g) the court’s decision as to whether the auditor in this case was liable for complicity in securities fraud, the court’s legal justification for the decision, and the impact of the red flags on the court’s decision.

scholarly journals The impact of foreign markets globalization on the price and functionality of electronic access control systems

2021 ◽  
Vol 92 ◽  
pp. 07009
Author(s):  
Martin Boroš ◽  
Filip Lenko ◽  
Andrej Velas
Keyword(s):  
Control System ◽  
Access Control ◽  
Control Systems ◽  
Value Added ◽  
European American ◽  
Foreign Markets ◽  
Access Control System ◽  
Electronic Access ◽  
The Impact

Research background: The research, which is the subject of the paper, is based on the global expansion of the use of electronic access control systems using biometric data for user verification. Due to the globalization of products from foreign markets to Slovakia, there is a competition between suppliers. The disadvantage is that organizations that are considering procuring an electronic access control system focus their attention only on its price. Globalization and global use have neglected the skills gap between European, American, and Asian markets. Purpose of the article: The paper will aim to point out, through a case study, the financial and functional differences of electronic access control systems. In the case study, a comparison of three different systems with the possibility of procurement on the European, American, and Asian markets will be performed on the building - administrative building. Methods: The article will mainly use methods such as the global method and the optimization model of the financial plan. As well as a case study, the cooperation of achieved results and analysis of possibilities of foreign markets. Findings & Value added: The results achieved by the paper will be globally usable in the conditions of European countries. These will be the conclusions of a case study that will point to the appropriateness of choosing an electronic access control system using biometric features in a standard office building. We can also consider the creation of a project budget usable for organizations as one of the added values.

scholarly journals Auditor’s Duty to Ensure Clients are Using Accounting Practices in Compliance with Generally Accepted Accounting Principles: A Case Study of Infinity Business Group, Inc.

2021 ◽  
Vol 06 (07) ◽  
Author(s):  
Stephen Errol Blythe ◽  
Keyword(s):  
Business Group ◽  
District Court ◽  
Securities Fraud ◽  
Fiduciary Duties ◽  
Generally Accepted Accounting Principles ◽  
Accounts Receivable ◽  
Accounting Practice ◽  
Accounting Principles ◽  
A Company

Infinity Business Group, Inc. (IBG), a company specializing in the collection of bad checks, was incorporated in 2003. IBG recorded its collection fees as Accounts Receivable even before the Not-Sufficient-Funds checks were collected, a method not in compliance with Generally Accepted Accounting Principles; accordingly, IBG’s auditor should not have issued unqualified opinions on the financial statements during 2003-2008. A $23 million write-off of Accounts Receivable in 2009 had a devastating effect on the company and it declared bankruptcy in 2010. In 2019, the Bankruptcy Court ruled: (a) the auditor’s unqualified opinions violated the U.S. Securities Exchange Act, and the auditor was forced to plead guilty to one felony count of securities fraud; (b) IBG’s CFO was dishonest when he responded to an inquiry from a lender about the Accounts Receivable; (c) Morgan Keegan & Company, Inc. (MK), a brokerage and investment banking firm contractually affiliated with IBG, encouraged IBG to discontinue using the improper accounting method; (d) IBG’s President Cordell made a misrepresentation to MK in 2007 when he stated that all of the questionable Accounts Receivable had been written off; (e) in 2008, MK became aware that IBG might change the accounting method; (f) MK never encouraged IBG managers to breach fiduciary duties to IBG; (g) MK did not owe IBG fiduciary duties, but even if it did, there is no evidence of a breach because MK encouraged discontinuance of the improper accounting practice; (h) some of the managers and directors of IBG were innocent, they did not participate in daily operations of the company, and they did not have control of the company; and (i) notwithstanding the fact they did not commit securities fraud, some of the “innocent” managers and directors failed to discharge their duties to IBG by advocating for the continued use of the improper accounting method. On appeal in 2021, the District Court affirmed the Bankruptcy Court, holding that: it did not make any legal errors; the Bankruptcy Trustee did not adequately prove damages caused by MK; and the Bankruptcy Trustee’s claims were barred by the Doctrine of in Pari Delicto.

scholarly journals THE EFFECT OF INTERNAL CONTROL ON ORGANIZATION PERFORMANCE IN REFERENCE TO MOHA SOFT DRINKS COMPANY: A CASE STUDY IN HWASSA PEPSI COLA FACTORY

2021 ◽  
Vol 9 (03) ◽  
pp. 204-215
Author(s):  
Ayneshet Agegnew Alemu ◽  
◽  
Tripiti Gujral ◽  
Keyword(s):  
Control System ◽  
Organizational Performance ◽  
Internal Control ◽  
Performance Standards ◽  
Internal Controls ◽  
Organization Performance ◽  
Effective Strategies ◽  
Support Organization ◽  
Internal Control System

Internal controls promote efficiency, reduce risks of assets loss and help to ensure the reliability of financial statements and compliance with laws and regulations (Coco, 2005).Thus successful organizations set performance measures that focus attention that identifies and communicates the success, support organization learning and provide a basis for assessment and reward (Brown, 2001).In order to be able to perform, organizations should critically look at customers and all stakeholders in business and know how best they are satisfying their needs. Kloot (1999), adds that organizations should continuously improve their services through assets accumulation, create value, improve quality services and flexibility, internal control system is intervened with organizations operating activities and it is most effective when controls are built into the organizations infrastructure becoming part of the very essence the organizations success in terms of continued improvement on performance standards as part of the competitive advantage of the organization.However according to how work is carried out some companies, there have poor documentations, no segregation of duties which affect organizational performance. This study will investigate the purpose of ascertaining the effect of internal control system on organizational performance.This study used descriptive design in soliciting information on the effect of internal control system on organizational performance. Data was collected from the respondents using questionnaires, and analyzed using descriptive statistics. The study findings indicated that the organization carried out proper authorization and approval of transactions. Sometimes transactions were carried out without proper authorization and sometimes there were no approval, this created room for conducting fraudulent activities like misappropriations.The result of the study also shows that that almost 2/3 of the respondents did agree with the fact that the organization reconciled physical cash with cash book balances, while 21% disagreed on the facts. This was because most business purchases (receipts) were not recorded so identifying the actual value of the assets was difficult leaving accountants with no knowledge on the assets.Based on this results, the study recommends that management should develop more effective strategies that will ensure that internal control is effective and efficient, so that fraud perpetration in the organization will be significantly reduced. The study also recommends that the company should work to correct its internal control system by periodic reconciliation of accounts.

Accuracy Control Variation-Merging Equations: A Case Study of Their Application in U.S. Shipyards

1985 ◽  
Vol 1 (02) ◽  
pp. 133-144
Author(s):  
Richard Lee Storch
Keyword(s):  
Control System ◽  
Assembly Sequence ◽  
Accuracy Control ◽  
Sponsored Research ◽  
Assembly Sequences ◽  
Under Construction ◽  
The Impact ◽  
Control Variation ◽  
Production Part

As a part of the ongoing move by many U.S. shipyards to adopt zone-oriented ship production, the need for an accuracy control system has been identified. Recent research has indicated that the accuracy control system can form the basis for performing process analyses as a means of improving productivity. This paper reports the results of Maritime Administration-sponsored research to develop a set of variation-merging equations for a specific vessel construction project. The equations are presented for the stern section (block 6) of the U.S. Navy T-AGOS ocean surveillance vessels under construction at Tacoma Boatbuilding Company. Data collected in 1982 provided process means and standard deviations for the following stages of production: part fabrication, panel line, subassembly and subblock assembly. Based on these data and observed assembly sequences, variation-merging equations are written and analyzed for the assembly of subblocks 602 and 603 and for the assembly of block 6 (that is, joining of 602 and 603). The impact on the merged variation of altering the assembly sequence is also analyzed and reported. The analysis is used to predict rework type (gas cutting or back-strip welding), and probabilities. Although these equations are dependent on the shipyard and the design, the techniques and principles for their development are applicable for any shipyard and any design. As such, they form a case study which makes them suitable as a guide for shipyards undertaking analysis of assembly procedures using variation-merging equations.

Customer data security and theft: a Malaysian organization’s experience

2019 ◽  
Vol 27 (1) ◽  
pp. 81-100
Author(s):  
Mohd Aizuddin Zainal Abidin ◽  
Anuar Nawawi ◽  
Ahmad Saiful Azlin Puteh Salin
Keyword(s):  
Control System ◽  
Internal Control ◽  
Advanced Technology ◽  
Close Monitoring ◽  
Content Type ◽  
Customer Data ◽  
Internal Control System ◽  
Data Theft ◽  
The Impact

PurposeThis study aims to identify weaknesses in current internal control systems in protecting customer data and the drivers that motivate employees to steal customer data and the impact of customer data theft on the organization.Design/methodology/approachA case study approach was taken to investigate and analyze internal control system weaknesses. One organization that involved investor and treasury services was selected as a case study in this research. A mixed method of data collection, specifically survey questionnaires and observations, was used.FindingsThis study revealed that employees are aware of the policy to protect customer data in their organization. Ironically, customer data theft still occurred despite the company having an internal control system. The main concern was the attitude of the employees to adhere to the policies in place, which becomes the major cause of internal control violation. Employees tend to ignore policies and standard operating procedures, providing opportunities for data theft and fraud to occur, although they realize this will result in a severe impact on the reputation of a company.Research limitations/implicationsThe results provide further confirmation of the fraud triangle theory, i.e. opportunity on the possible causes of the data theft and fraud, supporting prior empirical research and surveys conducted by researchers and global professional firms on fraud. This study, however, was conducted on only one organization with limited participation from employees because of the sensitivity of the nature of the topic.Practical implicationsThis study provided recommendations that can be a reference for companies and regulatory bodies in preventing customer data theft cases, such as regular training and awareness campaigns to the staff, stringent recruitment policies, close monitoring on the accessibility of customer data and continuous use of advanced technology to prevent a data breach.Originality/valueThis study is original, as it focuses on an organization that operates in the financial services industry, which is one of the most attacked sectors for data theft and cybercrime activity globally. Furthermore, this kind of research is rare in fraud literature, particularly in developing markets such as Malaysia. The findings of this study are inferred from the direct observation of the organizational and employee work environments, activities and behaviors, which are private and confidential and difficult to access by researchers for publication in academic journals.

scholarly journals THE IMPACT OF AUDITING AND INTERNAL CONTROLS ON THE MANAGEMENT OF A BUSINESS ORGANIZATION. A CASE STUDY OF PRUDENTIAL BANK LIMITED (WEIJA BRANCH)

2019 ◽  
pp. 51-64
Author(s):  
Alex Acquah ◽  
Takyi Kwabena Nsiah ◽  
Ebenezer Yaw Ofosuhene ◽  
Elizabeth Naa Akushia Antie
Keyword(s):  
Internal Control ◽  
Research Work ◽  
Internal Audit ◽  
Secondary Data ◽  
Internal Controls ◽  
Control Practice ◽  
Set Up ◽  
And Control ◽  
The Impact

For system-based auditing to work effectively the auditor will like to rely on internal controls to reduce the volume of substantive testing. It is therefore important for the auditor to examine the internal control practice and procedures that are in place in the client’s business. Where weaknesses are revealed, the auditor recommends ways of improving the systems. This research examines the relationship between some components (risk assessment, control environment and control activate) of internal control systems and the effectiveness of audit program in prudential bank Weija branch. The study exploited information by the help of both primary and secondary data from questionnaires and interview schedules. However, the purposive method of sampling was used in this research work. In all 10 respondents were sampled from the fifty (50) respondents under review. The data captured in this study, was analyzed and interpreted through descriptive method by the help of frequency tables, graphical presentation and tables. Based on the investigations carried, the internal control system was seen to be significant in detection of fraud in banks in Ghana; there is therefore the need for an effective and acceptable internal control structure in banking organizations. It was therefore recommended that Prudential Bank Limited set up internal audit units at their various branches all over the country, so that there shall always be internal audit personnel to ensure adherence to the internal controls that exist in the organization. In view of this, the internal audit personnel should also be revolved at regular intermissions to prevent any form of professional misconducts.

Thermoeconomic Approach to the Analysis of Energy System Control Strategies

2010 ◽  
Author(s):  
Vittorio Verda ◽  
Giorgia Baccino
Keyword(s):  
Control System ◽  
Control Strategies ◽  
Energy System ◽  
Primary Energy ◽  
System Control ◽  
Operation Condition ◽  
Performance Variation ◽  
External Causes ◽  
The Impact

In this paper a thermoeconomic approach is applied to the dynamic model of a Power System in order to investigate the effects of the control system on the primary energy consumption. To achieve this objective, various control strategies are compared when variations of the operation condition, due to some internal or external causes, are produced. Those variations causes the intervention of the control system, which rearranges the operating condition in order to have the controlled quantities within acceptable ranges. Generally the plant efficiency changes, depending on the selected strategy. A microturbine is considered as the case study. The analysis here proposed allows one to quantify the effect of the control on the performance variation of the components. The approach associates an exergetic cost and a thermoeconomic cost to the control system operation, which expresses the additional resource (primary energy and economic resources) consumptions that may be associated to the control. The impact on the initial and final steady states as well as the transient evolution are considered.

scholarly journals Disclosing A Side Of Internal Submission Control And Payment Of Claims: Study Of Ethnomethodology On The BPJS In Yogyakarta

2018 ◽  
Vol 1 (4) ◽  
pp. 341
Author(s):  
Mega Harum Ramadhani ◽  
Robiatul Auliyah ◽  
Muhammad Asim Asyari
Keyword(s):  
Qualitative Research ◽  
Control System ◽  
Data Collection ◽  
Direct Observation ◽  
Internal Control ◽  
Internal Controls ◽  
Daily Activities ◽  
Red Flags ◽  
Submission Process ◽  
Internal Control System

The purpose of the research is conducted to know the implementation of internal control on the process of submission and payment of claims by BPJS Kesehatan Yogyakarta. As well as knowing the process of submission and payment of claims. This type of research is qualitative research using ethnomethodology approach. Researchers use ethnomethodology method as the basis to expose the daily activities of the process of submission and payment of claims. Technique of Data collection through interviews with relevant informants and make direct observation to the object of research. The results of this research are to answer the problem and the purpose of this research, that BPJS Kesehatan has implemented internal control with maximum. Internal controls are capable to detect red flags in the submission process and payment of claims. Although there are some "problems" that occur also in the realm of BPJS kesehatan, but the management has been controlling against the various risks that are most likely to occur mainly in the process of submission and payment of claims. Thus the strengthening of internal control system in all aspects of activity in BPJS Kesehatan should always be attempted.

scholarly journals The Impact of Internal Control through Computerized Accounting System among Small and Medium Enterprises in Oman

2021 ◽  
Vol 2 (3) ◽  
pp. 65-74
Author(s):  
Asila Alzakwani ◽  
◽  
Maria Matriano ◽  
Keyword(s):  
Control System ◽  
Control Systems ◽  
Internal Control ◽  
Small And Medium Enterprises ◽  
Internal Controls ◽  
Control Measures ◽  
Accounting System ◽  
Internal Control System ◽  
The Government ◽  
The Impact

Purpose: The aims of the study were to identify and evaluate the internal controls used in a computerized accounting system of the SMEs, to identify and evaluate the merits and demerits of the internal controls used in the companies, and to identify the challenges in the implementation of internal control systems in the computerized accounting system of the SMEs. Design/methodology/approach: The population of the study was the employees of the SME’s registered with Ministry of Commerce and Industry (MOCI) in Muscat, Oman. Samples were selected from this population on a random sampling basis. One-member employee from the SMEs representing the enterprise filled the questionnaire. The survey was conducted through a questionnaire using a Google form. 220 samples were collected from the population. The data collected was analyzed using data processing methods and Microsoft excel. Findings: The study found that SMEs were using computers to perform their daily transactions and the accounting software used by SMEs were cheap, of low quality and not proficient enough. One of the components of internal control system, i.e. monitoring was implemented by most of the SMEs and they also stated that they rarely hired an external auditor for auditing because of the expensive auditing fees. It was also stated that the security mechanisms were not properly implemented in the SMEs because of the expensive cost. Research limitations/implications: The study suggested that the Government should emphasize the SMEs to implement a good internal control system. This can reduce the errors and also increase the efficiency of operations. SOX in Omani context should be strictly implemented making it statutory and mandatory for all the SMEs in Oman and such statutory laws will help the auditors to abide by the rules and regulations to be followed. Social Implications : Government should support SMEs through providing education on the importance of internal control systems as most of the employees of SMEs are poorly educated/illiterates. The Government should set a price ceiling to the external auditors on the auditing fees exclusively for SMEs so that they can afford. Originality / Value: No study was carried before in relates to the impact of the internal control system through the computerized accounting system among the SMEs in Muscat, Oman. This study will through light on the statutory laws required for the sake of internal control measures required for the SMEs.

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